offer strategy- Happily Ever After

[Anonymous]

ask your LO.

Some banks charge higher fees and/or rates on smaller loans.

Also, your lock might have expired by now and rates have gone up quite a bit.

[Anonymous]

Also, were you originally expecting to get a rate buy down or anything from the seller or something?

[XAVIERSMAMA]

Apparently the rates are higher on smaller loans, it still seems like quite a jump though.  I locked my rate on 12/28 so it hasn't expired yet.  The funny thing is, with the newer rate, my payment would be $50 more per month, even though the house is $20000 less.  Hilarious right?  I think I have no choice but to keep looking.  What does it say about the state of things when I have to purchase a more expensive house, to save money?

[XAVIERSMAMA]

The seller was contributing $6000 to closing costs, now with the lower appraisal they won't contribute anything.  The 4.5 rate was with a one point buy down.  I'm waiting for the LO to send me a breakdown to see how the new figures add up and whether the 5.7% includes a point or not.

[Anonymous]

the reasons for this is that the bank makes less money on fees (which are percentage based) and on interest on the file.  And alot of smaller loans they end up keeping in house instead of selling to the mortgage market, so they incur more direct risk. 

[Anonymous]

I am going to guess that there is no point included.  They may charge more up front funding fees for a smaller loan and you are loosing the point plus getting hit for another .2% jump.  so from 4.5 to 5.7  Just guessing though. 

[Anonymous]

xaviersmama,

Ask why!   Don't get hustled into a bigger mortgage payment becasue you want a house sooooooooo Baaaadd!  Do the math @ 4.5 & @5.7 .  That's money that can clearly go in your pocket.   You get a lower price and the bank sees an opportunity to make some money off of you.  I understand that the lender has to make his money but I would clearly renegotiate that interest rate.  What changed in your credit file that you had to get a higher rate?  if your answer is nothing I would ask more questions!)  What does He/She (lender) mean due to the loan?  It was always a loan!

I know you are geeked about getting the home you want @ a great price but interest is monthly.  Remember you have to pay the bill.

[Anonymous]

GIGI.  Not sure if this is that case, but it appears to be.  Banks charge higher fees and a higher interest rate for loans under a certain amount.  This is because they often have to eep these loan in house (higher risk) and stand to make less money on interest on a lower $ amount loan.  My guess is the price drop put the loan amount under the bank's min pricing for the lower rate and fees.  Most banks also will not do loans that are under a certain amount at all.  It is quite likely that this is what happened here as the loan amount is not under 100K and I woudl nto be surprised if that is the cutoff.  (I thought it was more like 75K and it varies by bank and area I am sure), but I would not be surprised if this is the case.

OP should definitely call and try to negotiate, but this may very well not be a case of bait and switch, but a case of the property not qualifying for the best rate/program due to sale price. (which was confirmed by the OP and LO already apparently. 

[XAVIERSMAMA]

I hear you gigi5, it's because the loan will be for less than $100000 and whenever they are lower the fees and the rates are higher.  I guess I'll have to keep looking.

[Anonymous]

Also GIGI, if you chec posts, the seller was orignally paying a point to buy down the rate.  With the drop in price due to the appraisal, the seller is no longer willing to do this.  So, part of the increase in rate is directly due to the loss of 6K in concession.  As a matter of fact, if the LO said he/she got the deal at 5.7% with the buyer (OP) not bringing any more money to the table, that means in effect that the OP is loosing 6K in concessions the buyer was going to pay and only getting a 1.2% jump in rate.  Seeing how that it almost 6% of the purchase price of the house in concession being lost due to the appraisal, it seems like not that bad of a deal.  The OP could always offer to buy down the rate themselves.  It almost seesm the bank is going out of it's way to mitigate costs if her out of pocket remained the same even ewith the loss of the 6K, and the only change is the rate jumping up 1.2%.